CS Executive · Corporate Accounting and Financial Management · Cash Flows
Ganga Engineering Ltd had plant (cost Rs 10,00,000, accumulated depreciation Rs 6,00,000) sold at a loss of Rs 50,000. It purchased new plant for Rs 8,00,000 in cash. What is the net cash flow from investing activities relating to plant?
Book value of the sold plant is Rs 4,00,000, so proceeds are Rs 3,50,000 after the Rs 50,000 loss. Deducting the Rs 8,00,000 purchase gives a net investing outflow of Rs 4,50,000. The loss is a non-cash adjustment in operating activities.
- ANet outflow of Rs 4,50,000Correct
- BNet outflow of Rs 4,00,000
- CNet outflow of Rs 5,00,000
- DNet outflow of Rs 4,50,000 shown after adding back the loss
Explanation
Book value = 10,00,000 - 6,00,000 = Rs 4,00,000. Sale proceeds = 4,00,000 - 50,000 = Rs 3,50,000. Net investing = 3,50,000 - 8,00,000 = outflow of Rs 4,50,000. The loss is added back in operating activities, not changed in investing.
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